Like humans, dogs and cats also have rods and cones in their retina, only in a different proportion. They have the ability to differentiate colors, but they have a more muted version of what we see. This is especially true for dogs, which probably see more shades of gray than all the individual colors. However, cats are unique, in that they have the ability to concentrate small amounts of light in their eyes, allowing them to see at night giving them extraordinary night vision.
Here is another good informational website about vision in cats.
http://videoforcats.com/catvision.htm